PAYE Settlement Agreements (PSA)

HMRC have announced a new online service for applying for, submitting, amending or cancelling a PSA. But what is a PSA and what is it used for?

A PAYE Settlement Agreement (PSA) is an agreement between an employer and HMRC that allows an employer to settle the tax liability on certain expenses and benefits provided to employees.

Under normal circumstances, employers are required to report and pay tax on these expenses and benefits on behalf of their employees. However, a PSA enables the employer to make a single annual payment to cover the tax due on all qualifying expenses and benefits provided to their employees.

PSAs can cover a wide range of expenses and benefits, including items such as staff entertaining, certain travel expenses, and work-related training costs. The key is these expenses or benefits must be minor, irregular or impractical, to be included in the PSA. The agreement removes the need for the employer to report and deduct tax on each individual expense or benefit, saving time and administrative costs.

A PSA can be applied for anytime during a tax year and up to 5 July after the end of the tax year your PSA relates to.

When a PSA is in place any Tax and National Insurance owed to HMRC must be paid by 22 October following the end of the tax year.

Please get in touch if you would like to discuss PSA’s further